Question 1

Businesses are allowed to record goodwill:

Accepted Answer

A) when they enjoy an outstanding reputation and loyalty with customers. 
B) if they acquire another company at a price higher than the market value of its net assets. 
C) when they continue the business of an acquired company. 
D) if their market value has increased enormously in the recent past. 
A) when they enjoy an outstanding reputation and loyalty with customers. 
B) if they acquire another company at a price higher than the market value of its net assets. 
C) when they continue the business of an acquired company. 
D) if their market value has increased enormously in the recent past.

Question 2

An asset was purchased for $24,000. The asset's estimated useful life was 5 years, and its residual value was $4,000. The straight-line method of depreciation was used. Calculate the gain or loss on sale if the asset is sold for $18,000 at the end of the first year.

Accepted Answer

A) $1,000 gain 
B) $2,000 loss 
C) no gain or no loss 
D) $2,000 gain 
A) $1,000 gain 
B) $2,000 loss 
C) no gain or no loss 
D) $2,000 gain

Question 3

On January 1, 2015, Zade Manufacturing Company purchased a machine for $40,000,000. The company expects to use the machine for 24,000 hours over the next 6 years. The estimated sale value of the machine at the end of the sixth year is $40,000. The company used the machine for 3,600 hours in 2015 and 5,000 hours in 2016. What is the depreciation expense for 2015 and 2016 if the company uses the double-declining-balance method of depreciation? (Do not round your intermediate calculations.)

Accepted Answer

Double-declining-balance depreciation =

Question 4

Steel Rolling Company purchased a mine on January 1, 2015, for $500,000,which holds an estimated 30,000 tons of iron ore. The company expects the asset to have zero residual value. The company has extracted 2,500 tons of ore in 2015 and 3,800 tons of ore in 2016. What is depletion expense for 2015? (Do not round your intermediate calculations).

Accepted Answer

A) $42,333 
B) $41,667 
C) $33,333 
D) $42,667 
A) $42,333 
B) $41,667 
C) $33,333 
D) $42,667

Question 5

Water Drops Company purchased equipment for $200,000. The company recorded total depreciation of $140,000 on the equipment. On January 1, 2015, the company traded in the equipment for new equipment, paying $150,000 cash. The fair market value of the new equipment is $250,000. Journalize Water Drop Company's exchange of equipment. Assume the exchange had commercial substance.

Accepted Answer

The answer of Water Drops Company purchased equipment for $200,000....

Question 6

An exchange transaction is said to have commercial substance if the future cash flows change as a result of the transaction.

Accepted Answer

A) True 
 B)False

Question 7

When a plant asset is discarded that is fully depreciated and has no residual value, the business will remove the plant asset account and accumulated depreciation account from the books.

Accepted Answer

A) True 
 B)False

Question 8

Capitalizing the cost of an asset involves crediting the asset account.

Accepted Answer

A) True 
 B)False

Question 9

On January 1, 2015, a company acquired a truck for $600,000. Residual value was estimated to be $20,000. The truck can be driven for 50,000 miles over the next 3 years. Actual usage of the truck recorded as: 8,640 miles for the first year. Give journal entry to record depreciation for the first year calculated as per the units-of-production method. (Do not round your intermediate calculations).

Accepted Answer

The answer of On January 1, 2015, a company acquired...

Question 10

Natural resource is an asset that comes from the earth and is consumed.

Accepted Answer

A) True 
 B)False

Question 11

Caterpillers Inc., a manufacturing company, acquired equipment on January 1, 2012 for $500,000. Estimated useful life of the equipment was 7 years and the estimated residual value was $10,000. On January 1, 2015, after using the equipment for 3 years, the total estimated useful life has been revised to 9 years. Residual value remains unchanged. The company uses the straight-line method of depreciation. Calculate depreciation expense for the year 2015.

Accepted Answer

A) $48,333 
B) $46,666 
C) $26,666 
D) $33,333 
A) $48,333 
B) $46,666 
C) $26,666 
D) $33,333

Question 12

In common with other intangible assets, goodwill must be amortized each year.

Accepted Answer

A) True 
 B)False

Question 13

Black n White Company purchased equipment for $45,000. The company recorded total depreciation of $36,000 on the equipment. On January 1, 2015, Black n White traded in the equipment for new equipment, paying $56,000 cash. The fair market value of the new equipment is $65,000. Journalize the company's exchange of equipment. Assume the exchange had commercial substance.

Accepted Answer

The answer of Black n White Company purchased equipment for...

Question 14

When an asset is fully depreciated, the residual value must be written off.

Accepted Answer

A) True 
 B)False

Question 15

Corel Sales sold its old office furniture for $5,000. Its original cost was $10,000 and at the time of sale, it had accumulated depreciation of $7,000. What was the effect of the transaction?

Accepted Answer

A) gain of $5,000 
B) gain of $2,000 
C) loss of $2,000 
D) loss of $5,000 
A) gain of $5,000 
B) gain of $2,000 
C) loss of $2,000 
D) loss of $5,000

Question 16

Acer Inc. plans to develop a shopping center. In the first quarter, they spent the following amounts:   What amount should be recorded as the land improvements cost?

Accepted Answer

A) $1,200 
B) $1,800 
C) $1,860 
D) $800 
A) $1,200 
B) $1,800 
C) $1,860 
D) $800

Question 17

On January 1, 2015, Zade Manufacturing Company purchased a machine for $40,000,000. The company expects to use the machine for 24,000 hours over the next 6 years. The estimated sale value of the machine at the end of the sixth year is $40,000. The company used the machine for 3,600 hours in 2015 and 5,000 hours in 2016. Calculate book value of the machine at the end of 2016 if the company uses the units-of-production method of depreciation.

Accepted Answer

A) $25,681,000 
B) $17,777,778 
C) $28,532,688 
D) $24,352,951 
A) $25,681,000 
B) $17,777,778 
C) $28,532,688 
D) $24,352,951

Question 18

Exchanges of plant assets that have commercial substance require any gain or loss on the transaction to be recognized.

Accepted Answer

A) True 
 B)False

Question 19

Businesses should not deplete natural resources because these do not decrease in value with time.

Accepted Answer

A) True 
 B)False

Question 20

If the sale price of a plant asset is higher than its book value, there will be a loss.

Accepted Answer

A) True 
 B)False

Businesses are allowed to record goodwill:

An asset was purchased for $24,000. The asset's estimated useful life was 5 years, and its residual value was $4,000. The straight-line method of depreciation was used. Calculate the gain or loss on sale if the asset is sold for $18,000 at the end of the first year.

An exchange transaction is said to have commercial substance if the future cash flows change as a result of the transaction.

When a plant asset is discarded that is fully depreciated and has no residual value, the business will remove the plant asset account and accumulated depreciation account from the books.

Capitalizing the cost of an asset involves crediting the asset account.

Natural resource is an asset that comes from the earth and is consumed.

In common with other intangible assets, goodwill must be amortized each year.

When an asset is fully depreciated, the residual value must be written off.

Corel Sales sold its old office furniture for $5,000. Its original cost was $10,000 and at the time of sale, it had accumulated depreciation of $7,000. What was the effect of the transaction?

Acer Inc. plans to develop a shopping center. In the first quarter, they spent the following amounts: What amount should be recorded as the land improvements cost?

Exchanges of plant assets that have commercial substance require any gain or loss on the transaction to be recognized.

Businesses should not deplete natural resources because these do not decrease in value with time.

If the sale price of a plant asset is higher than its book value, there will be a loss.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

Filters

Exam 10: Plant Assets, Natural Resources, and Intangibles

Businesses are allowed to record goodwill:

An asset was purchased for $24,000. The asset's estimated useful life was 5 years, and its residual value was $4,000. The straight-line method of depreciation was used. Calculate the gain or loss on sale if the asset is sold for $18,000 at the end of the first year.

An exchange transaction is said to have commercial substance if the future cash flows change as a result of the transaction.

When a plant asset is discarded that is fully depreciated and has no residual value, the business will remove the plant asset account and accumulated depreciation account from the books.

Capitalizing the cost of an asset involves crediting the asset account.

Natural resource is an asset that comes from the earth and is consumed.

In common with other intangible assets, goodwill must be amortized each year.

When an asset is fully depreciated, the residual value must be written off.

Corel Sales sold its old office furniture for $5,000. Its original cost was $10,000 and at the time of sale, it had accumulated depreciation of $7,000. What was the effect of the transaction?

Acer Inc. plans to develop a shopping center. In the first quarter, they spent the following amounts: What amount should be recorded as the land improvements cost?

Exchanges of plant assets that have commercial substance require any gain or loss on the transaction to be recognized.

Businesses should not deplete natural resources because these do not decrease in value with time.

If the sale price of a plant asset is higher than its book value, there will be a loss.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

Filters